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Gujarat may follow Kerala in levying anti-obesity fat tax on fast food | FNB News


If the Government of Kerala’s recent move to tackle obesity concerns – levy 14.5 per cent fat tax on fast food such as burger and pizza – gets a positive response, the Government of Gujarat is likely to follow suit by imposing a similar tax on fast food sold in the state. Interestingly, the move by Kerala is close on the heels of a 13.5 per cent luxury tax announced by Bihar on samosas, kachoris and other namkeens and sweets sometime back. While the concept seems similar, Bihar is not looking at the obesity angle, it is considering fast food items as ‘luxury.’

As far as the tax imposed by Government of Kerala is concerned, a source from finance department of the state, elaborated, “The fat tax will enable inflow of more money and will also act as a measure to tackle obesity in the state of Kerala. The fat tax will include all the junk foods served within the state.”

Obesity being a major issue faced by India and considering the fact that the move might inspire not just Gujarat but more states, the trade seems to be apprehensive about its repercussions. Piruz Khambatta, co-chairman, CII National Committee on Food Processing Industries, pointed out, “In the recent revised Kerala budget presented for the year 2016-17 on July 8, it proposed to levy tax on pizza, burger etc. sold through branded restaurants at 14.5%. Earlier it was clarified that pizza, burger is cooked food. Hence, tax was remitted on these goods at 0.5% (at compounded rates). The scheduled rate for cooked food is 5%,” and added, “CII has urged that the levy of this tax may be reviewed, as it would adversely affect growth of the Quick Service Restaurant (QSR) segment of the food industry and might set a similar trend for other segments, as well.”

Similarly, though the National Restaurants Association of India (NRAI) has applauded the move that will help create and build awareness among people on the undesirability of obesity and the need to eat right for good health, it has raised pertinent questions. Prakul Kumar, secretary-general, NRAI, observed, “However, there is no scientific justification to say that burgers, pizzas, tacos, donuts, sandwiches, burger patties, pasta, and bread fillings and other cooked food sold by branded restaurants are a cause of obesity. The proposal is arbitrary and discriminatory, since it targets only a certain set of specific foods and cuisines sold by ‘branded restaurants,’ while ignoring various other scientifically proven factors. We will continue to request the government to rethink their decision on adoption of fat tax as we anticipate that this move will not be beneficial for the restaurant industry.”

He further warned that any increase in costs would reduce consumption and effectively impact all stakeholders in a negative manner – the industry, the customer, and the government in lower revenues.

Meanwhile, offering a tax advisor’s perspective on the effects of levying such a tax, Sateesh Kulkarni, director, Corporate Catalyst India Pvt. Ltd, said, “Ideally there should be only one tax model when our Union ministry of food processing industries is trying to attract investments and encouraging entrepreneurs to take up food businesses and to manufacture in India. Till the goods and services tax (GST) comes into effect such taxes should be avoided, so that it will extend a room for manufacturers to make in India.”

He added, “Prices of foods that fall under the category of junk food, as identified by the government mechanism, will witness an increase initially. This surge in prices will be seen for a period of two to four months.”

Similar concerns in Gujarat

A similar move is being planned to tide over obesity concerns in the state of Gujarat. The state is planning to levy similar tax on FBOs involved in manufacturing of junk food such as pizzas and burgers. The state may consider a way to levy fat tax as the GST will come into play by 2017-18.

A Gujarat government official confirmed that the tax is on the anvil, but decision will be made based on the response in Kerala.

Opposing the move, Tanmay Bathwal, proprietor, Hirise Hospitality Pvt. Ltd, Gujarat, said, “I completely disagree with the move of fat tax. Today, there are healthy menus being served in several restaurants. There are several other ways to promote healthy food eating habits but imposing tax is not recommended,” however, added, “I do see that it will affect industry in the initial phase but later it will be just another tax for the restaurants.”

Source: FNB News

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